Curing the Corporate Anorexia

by C Mahalingam    Apr 02, 2009

Business cycles are common across industries and geographies. Good times do not last forever and nor do the difficult times. Smart companies learn to adapt and manage well. Great companies ensure that the results are balanced for all the stakeholders. Average companies often tend to ignore the interests of one stakeholder or more in preference to satisfying another. Balancing is not an easy job and perhaps is, in every sense of the term, a tight rope walk. But then, no one ever defined management and leadership as child s play.

Yo-Yo Dieting

In the last two decades, we have seen enough and more of cost cutting which in many cases also included downsizing or as often euphemistically referred to as smart-sizing or right-sizing . The maverick CEO of SEMCO Corporation, Ricardo Semler, refers to the corporate cycles of growth and retrenchment as yo-yo dieting .  Corporations accumulate fat over time and often during the days of irrational exuberance in revenues and profits. And as business cycles begin to kiss depression, the same corporations run around with mindless cost cutting exercises. Desperation overrides sanity.  Short-sightedness blinds vision. When applied to indiscriminate downsizing, it leads to a situation of too lean to be mean almost with epidemic proportion.

The 1/2 by 2 by 3 formula that drives organizations today

Well-known futurologist and Professor of London Business School Charles Handy speaks of the current environment as characterized by what he calls the " by 2 by 3 formula. This simply means that the pressure-cooker environment of today’s organizations demands that half the number of people deliver 3 times more work on being paid two times higher wages! And this may be the magic bullet for cost efficiency and higher productivity of modern times, but this does not come without a cost of its own. Workplace stress and related disorders arising there from are on the increase. Passionate organizations need people that are not distressed, but eustressed!  Eustress or the positive form of stress, whereby employees feel sufficiently challenged to get their best out day in and day out, is a different kind of engagement paradigm that is not even remotely connected with mindless downsizing.

Corporate Anorexia

Medical practitioners readily recognize a modern day disorder called anorexia nervosa.  Simply stated, it refers to an advanced disorder, pathological in nature, of acute fear of gaining weight leading to improper eating habits, undesirable exercise patterns and malnutrition, all eventually and often leading to death! Of course, let us not discount the devastating effects of depressive cycle and need for cutting the fat. But it is equally important to make sure that we do not indulge in what we believe as a cure that has dangerous and lasting side effects.  Many of us would recall the last few years of euphemistic downsizing in many public sector and even in several private sector organizations. This was referred to as voluntary retirement programs. What followed is anybody s guess. Most of the people that took the retirement under the scheme were those that were talented enough to find another job at a higher salary. By no stretch of imagination did these companies desire this segment of people to leave, although that is what happened to a large extent. Corporate anorexia will eventually kill the organizations as the past decades have shown in corporate America and elsewhere including in India.

Avoiding the Cure that Backfires

Voluntary or forced, right sizing initiatives must be planned with the extraordinary care it deserves. This exercise must be undertaken with a holistic perspective in mind. Often pure financial gains drive this exercise leading to multiple organ failures in the organization! Financial gains do play a role, but cannot be the sole driving force. Here are a few suggestions that may guide the corporations from falling prey to quick fixes and fast financial gains but eventually leading to the demise of the corporation itself:

  • Size up the business challenge: Understand from available data what would be the likely impact on the revenues and margins and for how long. Remember Herbert Simon s Nobel-prize winning concept of satisficing as opposed to waiting for ever for all the data and information required to do the assessment. Satisficing is a decision technique that allows you to make an acceptable solution based on available data rather than waiting for the ideal data configurations to make the perfect decision.
  • Look at your organization not as a network of processes (Quality Gurus preach this), or Work Systems (HR Gurus teach this) but as an assemblage of organization capabilities. Some of the key capabilities needed to pull the organization out of the difficult times would include flawless execution, customer centricity of the highest order,  boundaryless collaboration across business units within and outside with supplier and customers, talent with hard-to-find competencies and value innovation. And these capabilities are often found amongst people across the organization.
  • Hire for peaks, but more importantly hire for volleys: Difficult times perhaps require a careful dose of hiring. It is often not a blanket ban, but a ban on hiring for non-value adding positions. What is value adding and what is not is often not apparent unless the senior leaders debate and recognize that some of the back office functions may actually be crucial for customer delight and stickiness.
  • Envision a new high performance organization beyond the immediate task of trimming the workforce: Staff up for the future which is often already here, and ensure key players for the newly envisioned organization are not let go, due to shortsighted assessment. This will call for a reexamination of the fundamental business assumptions and strategies that have far too long remained as givens or as holy cows!
  • Pay attention to the residual toxity that ill-planned right-sizing initiatives leave behind. Plan the programs well and foresee the negative vibes it could leave on the people staying back. How you treat people you want to get rid of determines the commitment and loyalty of people you want to keep. They see this as company philosophy and culture that will impact them someday soon.
     Be transparent at all times. Communicate more. Difficult times actually require more communication than heydays.  But contrary to what common sense dictates, corporations tend to reduce communication during difficult times and forgo an opportunity to forge a healthy collaboration from all sections of employees to weather the storm.
  • Finally, remember the proverbial observation made by the charismatic and very highly successful former chairman of Allied Signal, Larry Bossidy: You cannot shrink your way to greatness!   Greatness is achieved by carefully orchestrated value propositions of customer intimacy, operational excellence and product leadership. And operational excellence is just not less people doing more work. It is much more to do with leveraging the people power for building organizations to last. It also means watching for value addition from every role and function, every process and person.

Let me conclude my thoughts on the subject with a statement that business cycles must be recognized with due respect and handled with care, but there must be a thoughtful strategy to balance the impact on business and people. After all, people are as important a stakeholder as anyone else to the organization is! And as Peter Drucker mentioned, we are living in a knowledge society and ignoring the human capital can only be detrimental to the long term survival of the company itself.

C. Mahalingam is Executive Vice President & Chief People Officer with Symphony Services Corporation.